Spreadsheets in tax: beat them, join them, or something in between?

A lot has been said and written about the use and abuse of spreadsheets in Finance. Consulting firms, software vendors, and the likes love to blame the spreadsheet for its risks and inefficiencies. They often promise that all those issues will magically disappear when you get rid of the ‘Excel hell’. But in reality, Excel is not that easy to get rid of.

Inseparable couple

As a consultant implementing software solutions for financial processes such as budgeting, forecasting, and financial consolidation, I have seen my fair share of spreadsheets. But if you think that Finance and Excel are an inseparable couple, you should definitely try the Tax department for once…

In general, it is not hard to imagine why spreadsheets are so common in today’s business: few software tools offer the ease of use, flexibility, and availability that Excel does. These arguments all apply to the use of spreadsheets in tax processes as well, but there are some additional reasons why it’s use is so widespread in the tax field:

1. Diversity in tax processes

Though we generally speak of ‘tax’ being one single function, it actually contains several processes that are fundamentally different from a technology perspective. Tax provisioning has a lot of shared characteristics with the financial consolidation process. It requires a streamlined and even somewhat rigid process of data collection, calculations, and reporting.

Cost allocations, on the other hand, are much more similar to processes such as costing or profitability management: this requires a greater level of detail and a lot of flexibility to adjust cost objects, drivers, etcetera. And then I’m not even going into topics like TP documentation or DAC6, which are again completely different from the ones mentioned earlier.

It can be hard to find software that can accommodate all the tax requirements and all the tax processes in one solution. Spreadsheets are then used as a low-cost alternative for some of the tax processes.

2. Ownership

As said, it is possible to make use of existing financial systems. From a functionality perspective, that is sometimes even an excellent idea. But it might feel like sitting in the backseat of a car: not being behind the wheel can be comfortable, but the downside is that you are not in charge of speed and direction. Self-sufficiency is often a key consideration for maintaining a spreadsheet-based environment.

Two extremes?

It may seem like there are only two options available if you are looking for tools to support your tax reporting processes. Either flexible and easy to use spreadsheets that may bring many risks and inefficiencies, or robust and stable enterprise solutions that take away your agility and self-reliance. These are two extremes, but there’s more in between: as an example, there are tools available that can expose all risks and errors in your existing spreadsheets.

You might not be aware, but one of those you can probably start using today: try unhiding the ‘Inquire’ bar in your Excel ribbon and unleash it on one of your Excel templates, you’ll be amazed… Alternatively, you could consider using a spreadsheet platform, such as Vena Solutions. This platform adds functionalities such as workflows, database storage, and audit trails to your existing Excel files.

How spreadsheets solutions can improve your tax processes

In some cases, these types of solutions can elevate your existing spreadsheets to a full-scope tax platform, but it could also be a solid interim solution while preparing for deep integration with other enterprise systems. Either way: no need to beat or join Excel, there are options available in between!

Questions? Ask Benno van Ingen.